Vikas Singhania, CEO, TradeSmart is of the view that equities are likely to correct in the near-term mainly due to pressure from tightening from central banks as inflation surges, as we believe inflation will worsen due to entrenched Omicron-induced lockdowns and supply chain disruptions.

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Edited Excerpts:

Q) What are your views on the market for the year 2022 after a double-digit gain seen in 2021?

A) 2021 was one of the best years in the market's history, which has increased expectations of a repeat performance in 2022, especially among the millennials.

However, looking at the gauges flashing before us, it looks like 2022 may be a period of consolidation.

With rising inflation in the US, the performance of the entire world market depends on the US markets. There are various headwinds in the US, especially with the conservative approach taken by the US Democrat President and the predicted risk of tapering the impetus, an increase in the FED rate.

There is also a possibility of an increase in the long-term capital gains and corporate taxes, which can dampen the spirits in the US markets, and with it, the world market.

Add to that the uncertainty surrounding Omicron as well as important state elections in India - it would be difficult to hazard a guess.

Adding to that, domestic red flags like rising inflation and interest rate concern, state elections and a China-led global crisis makes our vision slightly distorted.

Given the limited visibility, we would like to be cautious and place our 2022 Nifty target at around 18,000 and for Sensex, at 60,000.

Q) The next big event that investors will watch out for is Budget 2022. What are your expectations from the Finance Minister?

A) The budget this year will be around the time when important state elections are due. Market perception is that it would be a populist budget.

But we have seen this government has strayed a bit from the fiscal path, giving preference to growth over fiscal prudence.

The government has managed its fiscal math pretty well over the years and it is unlikely that they would try to rock the boat given the uncertainty around Omicron and high inflation.

There may be some state specific incentives, but those would not move the deficit needle too much.

This budget would be growth focused one. Expectations are that the government may announce measures to promote investments by the private sector.

Healthcare, agriculture, start-ups, electric vehicles, renewable energy are some of the sectors that may get special treatment.

Q) FIIs have been big buyers in Indian primary markets but sold in the cash market. How do FIIs see India relative to other Emerging Markets?

A) With some big primary market issues lined up in 2022, we believe this trend is likely to continue. The intensity of FII selling will depend on the US market, its inflation and interest rate scenario.

Unless foreign investors feel that Indian markets are at a compelling valuation as compared to their peers, they will continue to sell.

Q) In terms of valuations – India might be trading at a slight premium. Do you think the risk premium will continue in 2022 as well?

A) India's risk premium will depend on the rate at which it grows and the inflation rate in the country. With India likely to be one of the fastest-growing economies in the world, we feel the premium will continue.

A key factor to watch would be how the country manages the spread of Omicron.

Q) The year 2021 was all about big bang IPOs. Many tech-based companies made their debut along with companies from other sectors as well. What is the kind of fundraising you foresee in 2022?

A) 2021 has set a high watermark level to beat. But in all probability 2022 might overshoot that level, mainly because we have two big-bang issues lined up.

LIC and NSE are likely to tap the market in 2022 and between them may raise a large chunk of capital that was raised in 2021. Further, there is a visibility of a big pipeline of IPOs.

In the first quarter of 2022, 15 companies are lined up for IPOs. Reports say that 32 companies have already received SEBI clearance of their IPO and 33 others are in the queue.  

Q) Which sector could turn out to be a Dark Horse in 2022 and why?

A) As of now, given the limited vision we have, thanks to Omicron, we feel information technology should be a safe bet.

Safe havens are preferred during times of uncertainty and high volatility. In the present scenario, the IT sector offers one such safe-havens.

In a rising interest rate regime, companies with low or no debt tend to perform much better as compared to others.

IT sector had been one of the first sectors to recover and prosper during the two pandemic waves. In the current environment too, it can prosper.

In any case, IT is among the few sectors that have growth visibility. Recently, Accenture came out with shocking growth guidance that has fortified our bullish view.

Q) Big events which investors should take note of in 2022 that could impact markets and the economy?

A) There are a few events that an investor should watch with an eagle's eye. First and the one that is creating havoc in Europe and the USA is the spread of Omicron.

The spread and intensity of the virus have the potential to put the economy back to where it was in the first phase of the pandemic.

Inflation and interest rate, these twins can create havoc in the equity markets. With supply chain bottlenecks visible across the globe and no solution in sight, we may see some bad news on the inflation front before there are any good ones.

The annual budget, as usual, will be an event to watch out for.

Results of state elections, especially of Uttar Pradesh, will impact the market, whichever way the results go.

Q) If someone plans to invest say Rs. 10 lakh should they wait for clarity on Budget 2022 or dips if any can be used to deploy cash with a staggered approach? Do you recommend direct or MF investing?

A) Unless the market falls sharply and valuations become compelling, it is better to wait for the budget before deploying cash. Given the uncertain environment, it is better to be safe than sorry.

In mutual fund investing, it is better to go in for direct investing. Savings on commission may look small, but over the years they add up to a substantial amount, especially because of compounding.

Q) What will be your advice/recommendations to investors in 2022?

A) If one is investing through the mutual fund route, especially the Systematic Investment Plan (SIP) route, then they should continue it irrespective of where the market goes.

It is very difficult, if not impossible, to time the market consistently. With multiple headwinds, it would be safer to wait for some clarity, but if we get come companies that are at lucrative valuations, one can start nibbling in these stocks.

Q) Any mistakes which one should avoid making in 2022?

A) Leverage is something that needs to be avoided, like a plague. These are volatile times with limited visibility of the future.

Markets can move very fast in either direction, especially downwards. If one is trading in derivatives, it would be better to trade with limited risk strategies.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)